International Real Estate Markets Showing Signs of Growing Confidence, Says Two Reports

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After a year-long hiatus, investors and developers are ready to increase their spending in real estate, according to two unrelated surveys.

More than 70 percent of investors and developers polled by Jones Lang LaSalle said they planned to bump up their commitment in real estate compared to 2009. Twenty percent said they would increase their spending by more than 75 percent.

While the study represented a relatively small sample--60 attendees of the Urban Land Institute's Spring Council Forum--the results still provide an interesting barometer when compared to similar surveys at past conferences. For example, in 2009 30 percent said they planned to decrease their investments in real estate; this year only 7 percent expected a decline.

"Beginning in the third quarter of 2009, our Capital Markets teams began noticing a clear shift in the mindset of both buyers and sellers," said Jay Koster, president of Jones Lang LaSalle's Americas Capital Markets. "Both felt that a true pricing floor had been reached and there was a real sense of confidence that we had turned a corner on the economic downturn."

The majority of investors are looking for "well-located core assets," he said. Twenty-five percent of the respondents believe commercial property prices have hit bottom, while 36 percent said they expect to hit the floor some time in 2010.

Investors and developers were particularly interested in multifamily and hotel projects. Sixty-one percent said hotels would outperform other sectors, a sharp contrast to 2009 when 87 percent predicted hotels would underperform compared to other sectors.

Respondents were mostly pessimistic about office markets, with two-thirds predicting the market would underperform compared to other sectors. However, that's better than last year, when 100 percent predicted a down year for offices.

Meanwhile, a new global survey by Colliers International study found two-thirds of large institutional investors ready to increase their real estate portfolios. A majority of the 244 respondents said they believe the market is at or near the bottom.

"Investors clearly see the market resetting and about to enter the next up cycle," said Jamie Horne, executive sponsor of Colliers International's Global Investment Services team. 

Although many expressed concern about financing, 90 percent said they expect the money flow to loosen up in 2010.

Of the various markets, Latin American and the Pacific were seen as already improving, with most markets except for Eastern Europe moving into an "up" phase in the next 12 months. Canada, Latin America, Eastern Europe and Western Europe should return to "normal" by the first quarter of 2011, followed by the U.S. in the second quarter of 2011. Poland, Ukraine, Vietnam, Brazil and India were identified as appealing emerging markets. 

But many respondents also said they expect real estate cycles to be shorter than historical levels, "which serves as a warning to others that going forward, market participants will need to be more nimble," said Ross Moore, director of market and economic research for Colliers.

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